Tokyo gov't cap-and-trade can be precursor to state scheme

Apr 1. 2010 - Recating Lead - Kyodo News International

The Asia's first mandatory greenhouse gas emissions cut scheme launched Thursday by the metropolitan government of Tokyo, home to some 13 million people, provides a model for the central government, which is struggling to design a nationwide emissions trading system in a year.

Under the leadership of Gov. Shintaro Ishihara, Tokyo aims to slash its carbon dioxide and other heat-trapping gas emissions by 25 percent compared with 2000 levels by 2020. The program caps energy-related CO2 emissions from some 1,330 offices and factories in the capital and allows for trading of emissions credits.

The move by the mega city, whose energy consumption is about the same as that of Sweden or Norway, offers a case study for the state that urgently needs to draw up a blueprint for its cap-and-trade system to achieve its 25 percent emissions-cut goal by 2020 from 1990, and keep up with global efforts to set up carbon markets.

Teruyuki Ono, director general for climate strategy at the Tokyo government's Environment Bureau, told Kyodo News that becoming a front-runner in shifting to a low-carbon economy would benefit the city.

''Sooner or later, we will no longer be able to emit massive amounts of CO2 without any restrictions,'' Ono said. ''Transforming economic activities and facilities into low-carbon models would help Tokyo continue to develop in a sustainable manner and provide incentives to companies willing to do business here.''

Specifically, about 1,330 offices, commercial buildings and factories that annually consume more than 1,500 kiloliters of energy in crude oil equivalent terms will be required to cut total CO2 emissions over the fiscal 2010-2014 period by 6 to 8 percent from base-year levels.

Base-year levels are calculated from average emissions over a past period of three consecutive years between fiscal 2002 and 2007. Office buildings face an 8 percent target and factories are subject to a 6 percent goal.

In the fiscal 2015-2019 second phase, they will be required to slash emissions by 17 percent from their base-year levels.

Even though the high energy-consuming facilities account for only around 0.2 percent of some 700,000 industrial and commercial institutions in Tokyo, their CO2 emissions in 2007 stood at roughly 20 percent of the capital's total emissions of some 60 million tons.

To meet the emissions-cut targets, offices and factories in the capital can either make efforts on their own, such as updating to energy-saving equipment, or purchase emissions credits from other entities that have reduced CO2 emissions more than obligated levels in a system known as cap and trade.

The entities can also buy credits earned through reduction efforts by small- and medium-sized companies in Tokyo and the entities' large-scale branch offices outside the capital.

Renewable energy certificates issued by power generators can be also purchased.

But the credits from outside of Tokyo should not exceed one-third of required emissions-cut volumes.

Actual trading under the mandatory system in Tokyo is set to begin in fiscal 2011 after data on reduction efforts in fiscal 2010 are finalized.

Any entity that fails to attain its reduction goal will be ordered by the metropolitan government to cut emissions by 1.3 times the amount it failed to slash. Violators of such orders will have their names published and face fines of up to 500,000 yen.

Ono pointed out that the Tokyo cap-and-trade system has prompted companies to seriously implement steps to trim emissions.

For example, Mitsubishi Estate Co. began acquiring all the electricity to be consumed at its 38-story Shin Marunouchi Building from renewable energy sources from this month. Energy providers include a wind power station in Aomori Prefecture, northeastern Japan.

The director general emphasized that setting voluntary caps for companies would not lead to drastic cuts, as the Tokyo government policy to promote reductions through nonbinding targets since 2002 appeared to be insufficient for realizing the 25 percent emissions cut goal by 2020.

In May last year, the Tokyo government joined the International Carbon Action Partnership, an open forum comprised of about 30 countries and regions that have implemented or are actively pursuing the launch of carbon markets through mandatory cap and emissions trading systems.

The ICAP members currently share their experiences and knowledge and explore the future possibility of linking regional emissions-trading programs.

At present, the 27-nation European Union and 10 northeastern and mid-Atlantic U.S. states such as New York and Massachusetts operate the scheme mainly targeted at such high energy-consuming facilities as thermal power and steel plants.

The mandatory program is also scheduled to be launched by New Zealand in July and the alliance of regional governments in the United States and Canada including California and British Columbia in 2012, while similar steps have been proposed in Australia and the United States at the federal level.

''Only programs that set an overall ceiling for emissions are recognized as effective cap-and-trade schemes. Frameworks that lack the absolute caps will have no chance to be connected to other carbon markets in the future to form a global trading system,'' Ono said.

Japanese businesses such as steelmakers and power companies as well as labor unions are calling for an emissions ceiling based on units of production in relation to the nationwide scheme architecture for fear of negative impacts on their performance.

In a bill submitted to the Diet in March, the Japanese government left room for allowing a ceiling to be set per unit of production, or energy intensity target, for some industries in designing a specific emissions trading scheme in about a year.

The approach has been criticized by environmental groups as it would theoretically allow emissions to increase as long as production volumes grow.

''If the intensity target is introduced for some sectors, the entire system will be unfair. Such a scheme will be absolutely insufficient in trying to achieve the ultimate goal of slashing the total volume of greenhouse gases on Earth,'' Ono said.

The Tokyo government officially proposed to the central government last November to design the nationwide emissions trading program with absolute caps on total volume of emissions and make it fit for global standards so that it can be linked with other carbon markets in the future.